Sears Canada is making big changes to its return policies in a bid to simplify the process and regain consumers’ trust of the brand, the retailer’s chief executive told the annual general meeting of shareholders on Tuesday.

We heard from consumers that the return policy over the last few years had become less consumer friendly — Sears Canada CEO

Part of former Loblaw executive Calvin McDonald’s three-year vision to boost the company’s poor sales performance, the once-liberal return policy had given way to something more convoluted and muddy in recent years, with different return terms for different merchandise categories and a 20% restocking fee on a broad range of items docked from the value of the return.

“We heard from both consumers and our associates that the return policy over the last few years had become less consumer friendly,” Mr. McDonald said. The new return policy discontinues the restocking fee, gives customers 30 days to return all merchandise (15 days for electronics) and will give store credits of one year on returns without a receipt. Holders of Sears Card will get longer return terms.

Improving customer service is a critical part of Mr. McDonald’s vision to fix Sears, which recently put its store staff through five hours of customer service retraining.

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“Changing our associates’ behaviour is one of the big challenges that I am taking on in driving the new culture at Sears Canada,” he said. “Reinforcing the fact that the reason we are here and in business is because customers reward us with their business, and hence we stay in business … The policy just provides that flexibility to make a situation right.”

The retailer is also trying to shore up its fashion profile in an aim to woo consumers back to its stores, and said it will slash the number of private apparel brands to 20 from more than 90 offered currently to better focus its diffuse assortment. Its new “Look Report” promotional flyer resembles a glossy J Crew publication more than a traditional Sears catalogue. “We want big brands —we just don’t need a plethora of brands that are nominal in size and dollar volume.”

It is a strategy that lead to vastly improved sales performance at rival department store The Bay under the stewardship of Bonnie Brooks, who gave the retailer a more upscale positioning and jettisoned unpopular brands for a more focused assortment of private and exclusive lines.

But Mr. McDonald faces a very tough battle at Sears Canada, which has seen its annual revenue fall every year since 2006 and suffered an annual loss of $60.1-million in fiscal 2011.

He has outlined a three-year plan to turn the company around, but it is unfolding just as U.S. mass merchant Target Corp. is headed into this market. Target is expected to take a significant chunk of business away from all competitors when it opens 125 to 135 stores next spring.

“There are a lot of reasons why we can sit and point to how and why it’s tough to grow top line,” he said, citing low consumer confidence and acknowledging the challenge to change is significant. “Retail is tough …. but we are focused on what we can control, how we can deliver a better proposition to the customer.”

Engaging the enthusiasm of sales associates and buyers about the company’s new direction is critical to Sears Canada’s success, said one veteran retail analyst listening to the presentation. “That is where it is really going to work or not work,” the analyst said. “It is all of this stuff about building customer relationships for life — it ties into [Sears’] whole service cycle, and that includes returns.”

Since taking over the top job last summer at Sears, which is 96% owned by Sears Holdings Corp., Mr. McDonald has rid the stores of excess inventory and clutter, laid off about 500 head office and foodservice workers and plans to close three stores in Vancouver, Calgary and Ottawa after selling the leases back to landlord Cadillac Fairview for about $170-million. He has also reconfigured Sears Canada’s pricing strategy to one which more closely resembles Walmart’s, cutting the everyday ticket on 5,000 items and offering regular price-slashing deals to customers.

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